Insurance is a subject that not many people enjoy talking about. Even fewer choose to spend their days understanding the nuance of who sells it to them, and what their responsibilities to clients may be. Consumers put their protection needs in jeopardy, however, if they fail to understand the difference between an insurance broker and an insurance agent.
While the titles can be confusing, the main takeaway is that brokers represent their clients, and agents must represent their companies. Both have a duty to help you acquire coverage that is appropriate and fairly priced, but brokers and some agents have the ability to write coverage through multiple carriers. Other agents, called captive agents, only have the ability provide coverage through one insurance company. In this circumstance, as long as the coverage is deemed “appropriate” by the agent, his duty rests primarily with representing that company’s interest.
The case law on the subject is clear on one thing, however: a broker has a fiduciary duty to act in the clients’ best interest. In other words, he pledges allegiance to his clients’ needs over the insurance companies’ desire to make the highest profit.
Please don’t think that I am bashing captive agents or the companies they represent. Every company needs to make a profit, and insurance professionals need to make a living. Some agents representing singular companies do a fantastic job of protecting their clients with quality products from their companies. I have several friends within the industry and in personal life who are captive insurance agents, and they are full of honesty and integrity. My own father worked as a captive agent for over 30 years. But as dad often said, “If the only tool you have is a hammer, everything begins to look like a nail!”
Whether you decide to go with a broker, an independent agent, or a captive agent when obtaining coverage, do your own due diligence and be sure that they individual you choose to do business with is looking after your best interests.